Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether her Department has made an assessment of extending the Financial Conduct Authority's regulatory perimeter so that it can tackle (a) poor and (b) misleading debt advice delivered by insolvency practitioners and IVA firms.

The Government recognises the importance of individuals receiving accurate and reliable information when they are considering an Individual Voluntary Arrangement (IVA). When administered well, IVAs provide a debt solution to people who aren’t eligible for a Debt Relief Order, or who want an alternative to bankruptcy. However, if an IVA is unsuitable, it can leave people in debt for longer and result in further financial difficulty. Oversight of Insolvency Practitioners, who administer IVAs, is provided through standards applied by one of three Recognised Professional Bodies and overseen by the Insolvency Service.

The Insolvency Service is taking action to address concerns about the debt solutions market and expects to see swift action from volume IVA firms to eliminate poor practice. To support this, the Insolvency Service are also working with the sector to publish a new simplified IVA Protocol and key facts document to help consumers understand what they are signing up for. New guidance is also being published for Insolvency Practitioners on their control of cases. This is further to the 2023 publication of a new Standard for Insolvency Practitioners (SIP 3.1), making clear their responsibility to ensure consumers have received an explanation of all potential debt relief solutions so that they can make an informed judgement. The Insolvency Service continues to work to address poor practices through its ongoing review of the personal insolvency framework and continued collaboration with other regulators.

Debt advice providers, and debt packager firms which may refer individuals to IVA providers and other debt solutions, are regulated by the Financial Conduct Authority (FCA). In 2023, the FCA banned referral fees for debt packager firms to remove incentives to recommend debt solutions which may not be in the consumer’s best interest.

The ongoing collaboration between the FCA, the Insolvency Service, and other stakeholders reflects a concerted effort to enhance consumer protection in the debt advice and insolvency sectors. The Government will continue to monitor the effectiveness of existing regulatory frameworks.